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Four Ways to Play the Global Water Crisis

Water: The Next Oil

Written by Nick Hodge
Posted September 21, 2010

Natural resources can make us do crazy things — especially when there aren't enough of them.

Take a developing story in the Pakistani tribal belt...

Despite intense flooding in part of the country, some regions are still as thirsty as ever. (You can check out another red herring flood article here.)

So thirsty, in fact, that a two-week war has broken out over water rights.

Though you probably haven't seen it in the headlines, nearly 200 people have been killed since the Mangal tribe stopped water irrigation on lands used by the Tori tribe.

The scattered reports coming from the area claim, among other things, that “five villages were torched” and that “rival tribes are intermittently targeting each other's positions with heavy and light weaponry.”

One website even reported “the situation was exacerbated after Taliban infiltrated the area” to target one of the tribes that happened to be Shia.

I've been saying for years that water is a terribly precious commodity — much more important than oil.

You can't drink or cook with or bathe in oil...

But we humans seem to fall incredibly short when it comes to understanding problems of this scale.

The average person would probably tell you we have a limitless supply of water.

An infinite capacity to deny reality

Think there can't be water war in the United States? There already is... It just hasn't turned deadly yet.

In the Klamath River Basin of Oregon, farmers have been fighting the government for years about once-guaranteed but now cut-off irrigation channels. They've gone as far as breaking into the facilities that control water flow to redirect it to their farms.

Nevada infighting over water went all the way to the Supreme Court this June.

In Northern California, Chinatown II is unfolding. Three suits have been filed this month alleging illegal corporate ownership of water banks.

Georgia has sued Tennessee; Florida is fighting with Alabama.

It has led to what Robert Glennon, Professor of Law and Public Policy at the University of Arizona, calls “an infinite capacity to deny reality.”

If you can't grasp what he's talking about, just picture golf courses in Phoenix or swimming pools in Las Vegas.

More profitable than oil

Has anyone ever paid you not to use oil?

Exactly.

In Las Vegas, a $150 million initiative is underway to pay people to rip up their lush green lawns. So is a $3 billion pipeline to bring in water from a remote part of the state.

You know Lake Mead is nearly dry, right?

Projects like this are about to be commonplace, so you'd better start getting your portfolio in order...

For me, there are three main areas of water investment: transportation, treatment, and desalination.

And in the past few days, these sectors have been rallying as water woes creep into Wall Street headlines.

Mueller Water (NYSE: MWA), a pipe and flow control provider, and Pall Corp. (NYSE: PLL), a filtration and purification specialist, are each up more than 10% in the past week.

You can also play water-dependent agricultural crops with ag ETFs, or look into water-focused ETFs like the Claymore S&P Global Water (NYSE: CGW) or the PowerShares Global Water (NYSE: PIO).

But those will all be plays on moving and treating existing freshwater sources.

The real money will be made in desalination by the companies that find a cheap way to convert saltwater from the ocean into usable water.

This new video details one company on the verge of such a breakthrough, using nuclear reactors to power desalination units.

The company already has interest from around the world — including from Pakistan's neighbor, India.

Cheap, easy access to freshwater would go a long way to alleviate the problems detailed in this article. And it'll be just as lucrative as finding an untapped reserve of easy-flowing oil.

But there's only one company with several-times-your-money potential in the desalination sector. And word of it is getting out quickly, as this video starts popping up on investment sites all over the Web.

Call it like you see it,

Nick Hodge

Nick

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